Massachusetts/federal tax differences



Massachusetts tax law is similar to but not the same as federal. When examining the differences keep these 4 considerations in mind:

A List of Common Federal/Massachusetts Tax Differences:

Item of Income or Deduction

Federal Treatment

Massachusetts Treatment

Capital Losses Deductible against gains in part against income Ð Carry forward available MA has its own treatment without regard to the Federal law
Capital Gains Calculated @ varying rates MA taxes long term gains at 5.3% and short term gains at 12%
Excess Trade or Business Deductions Does not exist federally Concept reinstated as of 1/1/96
Interest on Student Loans Allowed as a deduction against AGI on page one of the 1040 up to $3,400 Fully deductible, not limited by federal law
Adoption Expenses Federal credit Fees fully deductible in year paid
ROTH IRAs Non-deductible contribution Ð Distributions tax free MA treatment the same
Education IRAs Non-deductible contribution Ð Distributions tax free MA treatment the same
Sale of Principal Residence Excludes $250K or $500K if qualified MA treatment the same
Section 162 "Trade or Business" Expenses Deductible MA treatment the same
Section 179 Depreciation Allowable write-off in 2012 - $139K MA treatment the same
SIMPLE plans for Employees Excluded from gross income MA treatment the same
SIMPLES for the Self-employed Deducted from AGI Not allowed as a deduction
Qualified Transportation Fringe Benefits Allows employer parking, van pool, etc. MA treatment the same
Moving Expense Excluded from income Excluded from income
Employer Contributions to MSA Excluded from income Excluded from income
Self-Employed Health Insurance 100% deductible 100% deductible
Real Estate Professionals A concept allowed since 1996 Now recognized
Depreciation Federal life & rate based on code of year put into service Previously limited to code of 1998, now the depreciation will conform exactly to the federal amount except for bonus depreciation
1231 Property If gain, property is taxed as if a capital asset Ð If sale is a loss it is taxed as if ordinary income subject to recapture MA law makes it a capital asset always, not subject to recapture as ordinary income

This material courtesy of Philip Dardeno, CPA MST of Reading, MA ~ 781-942-9820 & Appeals for both Corporations and Individuals.

Click here to read Phil's famous "Top Ten" issues at DOR.

Click here to read Phil's current events list.

Click here to read Phil's current Massachusetts/Federal Differences.


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